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Top 10 tips for 2015 Canadian Tax Return

    Top 10 Tips For 2015 Canadian Tax Return

Top 10 Tips For 2015 Canadian Tax Return is basic guide. The biggest challenge Canadian professional real estate investors face is tax time.It is important to have bit of knowledge and the latest changes. Flipping4Profit.ca intend to bring Canadian tax experts to bring awareness. Top 10 Tips For 2015 Canadian Tax Return are provided is general terms and you are urged to consult appropriate Canadian professionals to take care of complicated tax matters.

Moving paperless. If you haven’t registered yet for the Canada Revenue Agency (CRA) service “My Account,” you should (go to: cra.gc.ca/myaccount). It allows you to access and manage all of your personal tax information and correspondence with Canada Revenue Agency (CRA) online. On the front page of your tax return, be sure to register for online mail and you’ll receive an e-mail notification any time there is mail for you to view on the My Account online service. Your Notice of Assessment will arrive electronically this way. Go ahead, save some trees.

Splitting income. Starting this year you’ll have the ability to claim the “Family Tax Cut” credit. Claim it on line 423 on Schedule 1 of your tax return. This credit will allow you to save up to $2,000 in taxes by effectively shifting part of the tax burden from a higher-income spouse or common-law partner to the one with a lower income. You’ll have to meet the criteria, and complete Schedule 1A, which has all the details.

Tax-free savings accounts Canadians can put another $5,500 into a tax-free savings account in 2014. Another $5,500 can be socked away in 2015, bringing total cumulative contribution room since 2009 to $36,500 as of this year. Amounts withdrawn from a TFSA in 2014 can also be re contributed this year, increasing 2015's available contribution room.

Adoption expenses. If you’re adopting, or have adopted, a child who is under 18 years of age, you may be able to claim up to $15,000 of adoption expenses (up

Top 10 Tips For 2015 Canadian Tax ReturnTop 10 Tips For 2015 Canadian Tax Return

from $11,774 previously). The expenses should be claimed in the year the adoption process ends. You can split the $15,000 limit between you and your spouse or common-law partner, which can make sense if you’re both in high tax brackets.

Children’s fitness amount. If you’ve paid fees for your child to participate in a prescribed program of physical activity, you can now claim up to $1,000 of those fees (up from $500 last year), which will provide tax savings in the form of a non-refundable credit.

Realize capital losses to offset current year capital gains: If you have realized capital gains in the current year and unrecognized capital losses in other investments, consider disposing of the loss investments prior to the end of the calendar year in order to offset the capital gains.

Lifetime Capital Gains Exemption (LCGE):The LCGE is increased for indexation to $813,600 for 2015. Quebec announced an increase in their LCGE to $1 million for qualified farm and fishing property for 2015 and later years.

Realize capital losses in 2015 to offset capital gains realized in 2012 to 2014 :Capital losses can be carried back
for three years to recover tax paid on capital gains. For example, a $100 capital loss in 2015 would trigger a $50 allowable capital loss; if you have no capital gains in 2015, this capital loss could be used to offset a capital gain in any of the three preceding years, from 2012 to 2014.

Medical expenses. This year, costs for the design of personalized therapy plans for those eligible for the disability tax credit and the cost of service animals used to help those with severe diabetes can now be claimed. Be sure to claim your medical expenses on the tax return of the lower income spouse. This could save you more tax since your claim is limited to $2,171 (for 2014) or three per cent of net income, whichever is less.

Volunteer tax savings. If you’re an emergency services volunteer you might qualify to claim a $3,000 amount on lines 362 (volunteer firefighters) or 395 (search and rescue volunteers, which is new for 2014). Alternatively, you can claim an exemption for up to $1,000 of income paid to you as an emergency services volunteer. But you can’t claim both the $3,000 amount and the $1,000 exemption. You’ll likely be better off claiming the $3,000 amount; a tax pro or tax software can help you make that decision.

Lifetime capital gains exemption. If you happen to own qualified small business corporation shares, or qualified farm and fishing property, you may be able

Top 10 tips for 2015 Canadian Tax Returnto shelter from tax up to $800,000 in capital gains on the sale of those assets. The rules were simplified this year to accommodate those who do a combination of farming and fishing. Check out Canada Revenue Agency (CRA) guide T4037, Capital Gains, or speak to a tax professional for more information.

GST/HST credit. If you’re entitled to the GST/HST credit paid based on family net income, it used to be that you had to apply for the credit on your tax return. No longer. When you file your tax return, Canada Revenue Agency (CRA) will now determine your eligibility and will tell you if you are entitled to the credit.

Automobile Expenses:The rules surrounding motor vehicle expenditures in relation to rental property operations can be confusing, particularly when an investor owns only one rental property. You can only deduct “reasonable” motor vehicle expenses if you meet all of the following conditions:

you receive income from only one rental property that is in the general area where you live;
you personally do part, or all, of the necessary repairs and maintenance on the property; and
you have motor vehicle expenses to transport tools and materials to the rental property

The Canada Revenue Agency (CRA) specifically states that you cannot deduct motor vehicle expenses you incur to collect rents.

The Canada Revenue Agency (CRA) considers these to be personal expenditures.

Note that the rules differ if you own more than one property.

Mortgage payments of rental and investment properties:A frequently misunderstood deduction is mortgage interest. It is only the interest portion of your mortgage payment that is deductible. The principle portion of your mortgage payment, while a major factor in the cash-flow of your investment, is a repayment of debt and thus not a deduction from taxable income.

The Canada Revenue Agency (CRA) voluntary disclosures program: allows taxpayers to 'fess up about something on their current or past tax returns that may not pass the smell test.Doing this can prevent additional penalties from being assessed. But for the disclosure to be accepted, you must contact the Canada Revenue Agency (CRA) before it contacts you.

Repairs and maintenance of rental properties:Repairs and maintenance are a very tricky area from a tax perspective. Generally speaking, when you make small repairs or routine maintenance to your rental property, you are incurring a current expense and can immediately take this as a deduction against your rental income.

Renovation versus Repair expenses:The situation becomes more complicated when you are making larger expenditures. For example: if you were to tear out an old, outdated (but functional) washroom in your rental property and replace it with a brand new modern one, you are probably making a lasting improvement to your investment rather than a simple “repair” to a broken component. In this case you would not be permitted to deduct the expenditure. Instead you would capitalize the renovation and depreciate it over an extended period of time.

The Canada Revenue Agency (CRA) Rental Income Guide (T4036): is a great starting point for any investor looking for plain-English information on rental property taxation. While Canada Revenue Agency (CRA) guides do not hold the same weight as actual tax law, they are based on legislation, case law and the Canada Revenue Agency (CRA) internal policies.

Foreign Investments: If you owned foreign investments whose total cost exceeded $100,000 at any point in 2014, don’t forget to file the newly updated Form T1135 “Foreign Income Verification Statement” when you prepare your tax return this season.Foreign property that’s reportable will include the obvious things like money in a Florida bank account or an Arizona rental property, but also includes foreign stocks, like Apple or Google, which are held in your Canadian, non-registered brokerage account. It excludes foreign securities held in Canadian mutual funds or inside a registered account like an RRSP, RRIF, TFSA or RESP.

The form is due on April 30, the normal filing date for most taxpayers, but can be filed as late as June 15 if you or your spouse or partner were self-employed in 2014. Penalties for late-filing Form T1135 are severe: $25 for each day beyond the deadline, up to a maximum of $2,500, plus interest.

On the form, you are asked to report the types of foreign investments you owned in 2014 and their maximum cost amount during the year. You also must report their fair market value at the end of the year, along with the country in which those assets are located. Taxpayers are also asked about the income (loss) from those investments along with any gains (or losses) from the disposition of those assets in 2014.

Consider paying dividends
Paying salary and bonus can result in high tax bracket for business owners. Using dividends to pay the business owners can result in substantial tax savings

Creating a Holding Company
Risk of clients and creditors suing the corporation
Benefits of holding company
Creditor proof excess funds of operating company
Enables income splitting and tax free dividends from operating company
Holding company will have more pre tax money to invest

Break on Capital Gains by donating to Charities in Fed Budget 2015

The federal government is going to make it a little easier to avoid taxes on real estate investment gains — as long as you give the money to charity.

Federal budget 2015 will let Canadian real estate investors donate proceeds from their real estate and be exempt from some capital gains tax which is charged on investment property. Principal residences are already exempt from the tax.
 

To qualify, you have to sell your real estate to an “arm’s length party” — someone not related to you — and then donate the proceeds within 30 days.
If a portion of the proceeds is donated, the exemption from capital gains tax is applied to that portion. The new measure, which would reduce federal revenue by about $265 million over the 2016–17 to 2019–20 period, applies to donations related to properties sold after 2016.
As an example, someone who bought a Canadian property for $300,000 and then sold it for $500,000, and donated $200,000 to charity would be exempt from capital gains tax on 40% of that $200,000. That person would be paying tax on $120,000 and since capital gains are taxed at a 50% rate, they would only pay tax on the $60,000 taxable portion.

In the case of Canadian Professional real estate investor who bought a Canadian property for $100,000 which appreciated to $500,000, they could donate that same $200,000 and get a break on $160,000 of capital gains. They would have a capital gain of $240,000, of which $120,000 would be taxable.

Delaying of filing your tax return after deadline have severe penalties

Regardless of whether you owe the government a dime, filing late may also delay the payment of your quarterly GST/HST credit or Child Tax Benefit.

The deadline for individuals to file their income tax returns is a week away, on April 30. For the self-employed, the deadline is June 15.

Missing that deadline for filing tax return triggers charges that start piling up on your tax bill right away.

If you owe money for 2014, compound daily interest is charged starting May 1. But you'll also face the late-filing penalty of five per cent of the amount owing, plus one per cent of the balance owing for each full month your return is late to a maximum of 12 months.

That amount can bloat even further if you were charged a late-filing penalty for 2011, 2012, or 2013. If that's the case, your late-filing penalty for 2014 may be 10 per cent, plus two per cent of your 2014 balance owing for each full month your return is late, to a maximum of 20 months.

As well, you need to file a timely tax return to apply for the quarterly GST/HST credit, or if you or your spouse or partner want to receive the Child Tax Benefit.
The CRA encourages Canadians to use its quick, easy, and secure electronic services to file their income tax and benefit returns on time and pay any amounts owing.

Even if you're missing information, tax professionals say you should file your return on time anyway to avoid the penalties.You can file the changes later, once you get the information, when you receive your notice of assessment from the CRA. You're also able to request changes to tax returns for the previous 10 years if you realize you failed to claim deductions you were entitled to.

This information is intended for general purposes only. Care has been taken to ensure the information herein is accurate.However, no representation is made as to its accuracy. This information should not be relied on to replace professional advice relating to your specific circumstances

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